Income Taxes |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Income Tax Disclosure [Abstract] | |
| Income taxes | Income Taxes The Company calculates its interim income tax provision by applying its best estimate of the annual expected effective tax rate to its ordinary year-to-date income or loss. The tax or benefit related to significant, unusual or extraordinary items that will be separately reported or reported net of their related tax effect are individually computed and recognized in the interim period in which those items occur.
The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgments including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in foreign jurisdictions, permanent and temporary differences as a result of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the tax environment changes. To the extent that the estimated annual effective tax rate changes during a quarter, the effect of the change on the prior quarters is included in the tax expense for the current quarter.
For the three months ended September 30, 2023 and 2022, the Company recorded a tax provision of $34 million and $101 million, respectively, which represented an effective tax rate of 35.1% and (4.8)%, respectively. For the nine months ended September 30, 2023 and 2022, the Company recorded a tax provision of $173 million and $251 million, respectively, which represented an effective tax rate of 29.0% and (15.5)%, respectively. The 2023 rate differs from the U.S. federal income tax rate of 21% primarily due to state and foreign tax expense and permanent items. The 2023 effective tax rate has increased from the prior year for the three and nine months ended September 30, 2023 primarily due to the 2022 goodwill impairment loss of $2,420 million that is not deductible for tax purposes. Excluding the goodwill impairment loss, the effective tax rate would have been 32.9% and 31.5% for the three and nine months ended September 30, 2022, respectively. For the three months ended September 30, 2023, the effective tax rate has increased from the prior year rate, excluding the goodwill impairment loss, primarily due to permanent items including a civil penalty (see note 10) that is not deductible for tax purposes and foreign taxes which were impacted by the relative decrease in pretax income. For the nine months ended September 30, 2023, the effective tax rate has decreased from the prior year rate, excluding the goodwill impairment loss, primarily due to the reversal of tax expense accrued in prior periods related to the settlement of state income tax reserves.
The Company participates in a consolidated federal return filing with Qurate Retail. As of September 30, 2023, the Company's tax years through 2018 are closed for federal income tax purposes, and the Internal Revenue Service ("IRS") has completed its examination of the Company's tax years through 2021. The Company's 2022 and 2023 tax years are being examined currently as part of the Qurate Retail consolidated return under the IRS's Compliance Assurance Process program. The Company, or one of its subsidiaries, files income tax returns in various states and foreign jurisdictions. As of September 30, 2023, the Company was under examination in Colorado, Massachusetts, Minnesota, New York City, Pennsylvania, South Carolina, Wisconsin, Germany and the U.K.
The Company is a party to the Tax Agreement with Qurate Retail. The Tax Agreement establishes the methodology for the calculation and payment of income taxes in connection with the consolidation of the Company with Qurate Retail for income tax purposes. Generally, the Tax Agreement provides that the Company will pay Qurate Retail an amount equal to the tax liability, if any, that it would have if it were to file as a consolidated group separate and apart from Qurate Retail, with exceptions for the treatment and timing of certain items, including but not limited to deferred intercompany transactions, credits, and net operating and capital losses. To the extent that the separate company tax expense is different from the payment terms of the Tax Agreement, the difference is recorded as either a dividend or capital contribution.
The amounts of the tax-related payable due to Qurate Retail as of September 30, 2023 and December 31, 2022 were $3 million and $23 million, respectively, and were included in accrued liabilities in the accompanying condensed consolidated balance sheets.
|